Avnet 2001 Annual Report Download - page 39

Court Order with the Environmental Protection Agency (“EPA”)
for the environmental clean-up of the site, the cost of which,
according to the EPA’s remedial investigation and feasibility
study, is estimated to be approximately $6.3 million, exclusive of
the $1.5 million in EPA past costs paid by the potentially responsible
parties. Pursuant to a Consent Decree and Court Order entered
into between the Company and the former owners of the site, the
former owners have agreed to bear at least 70% of the clean-up
costs of the site, and the Company will be responsible for not more
than 30% of those costs. In addition, the Company has become
aware of claims that may be made against it and/or its Sterling
Electronics Corp. subsidiary, which was acquired as part of the
acquisition of Marshall Industries. Sterling once owned 92.46% of
the capital stock of Phaostron, Inc. In August 1995, Sterling sold
the interest in Phaostron to Westbase, Inc. At the time of the sale,
Sterling and Westbase entered into an agreement related to envi-
ronmental costs resulting from alleged contamination at a facility
leased by Phaostron that is a part of the San Gabriel Valley
Superfund Site. The agreement provided that Sterling would pay
up to $800 thousand for environmental costs associated with the
site. The Company does not believe that Sterling or the Company will
be responsible for environmental costs in excess of $800 thousand and
has established what it believes to be adequate reserves for any share
of such costs that may be borne by Sterling or the Company. Based
upon the information known to date, management believes that the
Company has appropriately accrued for its share of the costs of the
clean-ups with respect to the above mentioned sites. The Company
is also a defendant in a lawsuit brought against it at an environmental
clean-up site in Huguenot, New York. At this time, management
cannot estimate the amount of the Company’s potential liability, if
any, for clean-up costs in connection with this site, but does not
anticipate that this matter or any other contingent matters will have
a material adverse impact on the Company’s financial condition,
liquidity or results of operations.
Management is not now aware of any commitments, contingencies
or events within the Company’s control which may significantly
change its ability to generate sufficient cash from internal or
external sources to meet its needs.
ACQUISITIONS
During 2001, the Company has acquired a number of businesses that
are already having a substantial positive impact on the Company.
All of the acquisitions described below, except for the acquisition of
Kent, were accounted for using the “purchase” method of accounting.
On July 3, 2000, the Company acquired Savoir Technology Group,
Inc., a leading distributor of IBM mid-range server products in the
Americas. In the merger, holders of Savoir common stock received
0.11452 of a share of Avnet common stock for each share of Savoir
common stock, and cash in lieu of fractional Avnet shares. The
exchange ratio, as well as the price paid for fractional shares, was
based upon an Avnet stock price capped at $34.2736 as adjusted to
reflect the Stock Split. Holders of Savoir series A preferred shares
received 0.16098 of a share of Avnet common stock for each share
they held and cash in lieu of fractional Avnet shares. The total cost
of the acquisition of Savoir including estimated expenses was
approximately $145.8 million, consisting of the cost for the Savoir
shares of $111.1 million in Avnet stock and $0.7 million in Avnet
stock options (net of related tax benefits of $0.5 million) as well as
$1.8 million for direct transaction expenses and $32.2 million for
the payoff of pre-existing Savoir debt. The above dollar value of
Avnet stock reflects the issuance of 3,736,954 shares of Avnet stock
valued at an assumed price of $29.66 per share.
On October 31, 2000, the Company completed its acquisition of
certain European operations of the VEBA Electronics Group
consisting of (a) the Germany-headquartered EBV Group, consisting
of EBV Electronik and WBC, both pan-European semiconductor
distributors, and Atlas Services Europe, a logistics provider for EBV
and WBC; and (b) the Germany-based RKE Systems, a computer
products and services distributor. The amount paid at closing of
$740.0 million includes the payoff of substantially all of the debt on the
books of the companies acquired and is subject to closing adjustments.
On February 15, 2001, Avnet completed the acquisition of RDT
Technologies Ltd. and combined its operations with Avnet Gallium
to form Avnet Components Israel Ltd. RDT Technologies reported
sales for the year ending December 31, 2000 of approximately
$90 million.
On May 10, 2001, Avnet acquired Sunrise Technology Ltd., a
privately-held, electronic components distribution company serving
indigenous and multinational OEMs and contract manufacturers
in China. Sunrise reported revenues of approximately $230 million
for its fiscal year ending March 31, 2001.
In addition, as described at the beginning of this MD&A, the
Company completed the acquisition of Kent on June 8, 2001 in a
stock-for-stock transaction accounted for as a “pooling-of-interests.”
On October 20, 1999, the Company acquired Marshall Industries,
then one of the world’s largest distributors of electronic components
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